House Financial Services Committee Chairman Jeb Hensarling (R-Texas) has released a discussion draft of the Financial CHOICE Act, legislation that would replace large parts of the failed Dodd-Frank Act. It has attracted some high-profile fans. Three Nobel Prize winning economists, a former U.S. Treasury Secretary, and a host of academics and policy officials have released a letter that states:

"We support the reform principles that underlie the proposed Financial CHOICE Act which promote higher economic growth without bailouts, reduced risk of crises, and simplification of the regulatory process by emphasizing market mechanisms operating through the rule of law."

The very same day the bill was released, I had the privilege of moderating a panel with several of my think-tank colleagues (Chairman Hensarling gave a keynote address) to discuss our work related to the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Financial CHOICE Act. All the panelists had written extensively on what’s wrong with Dodd-Frank, and recently collaborated on a book titled The Case Against Dodd–Frank: How the “Consumer Protection” Law Endangers Americans.

A title-by-title take down of Dodd-Frank, the book discusses how it exacerbates and compounds the economy’s existing ills rather than deals with the causes of the financial crisis. It also proposes how to fix these problems, and many of those ideas are reflected in the Financial CHOICE Act.

Congress is probably still a long way from actually passing a bill like the Financial CHOICE Act, but the draft shows that Chairman Hensarling and members of his committee recognize how harmful Dodd-Frank has been. Indeed, the chairman has vowed his committee will not rest until “we toss Dodd-Frank onto the trash heap of history.” Though the Financial CHOICE Act does not repeal Dodd-Frank (the optimal fix), it stands as a pro-growth, pro-consumer alternative.

The first section of the Financial CHOICE Act emphasizes the key principle that should drive any financial regulatory reform effort: there’s no justification for heavily regulating companies that bear their own losses. The section is titled “Regulatory Relief For Strongly Capitalized, Well Managed Banking Organizations,” and that’s a pretty good summary of what it does.

It provides regulatory relief for banks that choose to fund themselves with relatively higher equity capital. Think of it as a Dodd-Frank off-ramp.

Federal Reserve Chair Janet Yellen offered partial support for the off-ramp idea, but suggested only smaller banks should be given such an option.

Whether only small banks should get regulatory relief is a great topic for debate, as is the question of what the “right” equity level should be to qualify for such relief. Since the proposal is a discussion draft, now’s the time to debate.

Already Dodd-Frank’s supporters have started attacking the proposal. Sen. Elizabeth Warren (D-Mass.), said it should be called “the Big Wet Kiss for Wall Street Act” and added:

"It’s clear Congressman Hensarling and fellow Republicans think the poor Wall Street banks have suffered too much under the new rules and it’s time for them to return to the good ol’ days before the 2008 crisis, when these banks ran wild."

Sherrod Brown (D-Ohio), the top ranking Democrat on the Senate Banking Committee, issued similar statements blaming the crisis on deregulation. Of Hensarling’s plan, Brown said that it

"underscores the collective amnesia of many in Congress and on Wall Street about how devastating the financial crisis was for an entire generation of working and middle-class Americans."

Dennis Kelleher, President and CEO of Better Markets, also disparaged the effort:

"Missing an historic opportunity to propose a serious plan that would have received bipartisan support, the Chairman of the House Financial Services Committee, Jeb Hensarling, instead outlined the Republican vision for gutting the 2010 Dodd Frank financial reform law."

Such attacks are as predictable as they are wrong. Dodd-Frank’s most ardent supporters are heavily invested in the dangerous myth that deregulation caused the financial crisis, so they have to stick to their narrative. It’s only natural that they label Dodd-Frank critics as people who want to return to the wild west of financial markets.

In truth, that kind of unregulated market hasn’t existed in the U.S. for at least a full century, if ever. Critics of the Financial CHOICE Act also fail to acknowledge that many Dodd-Frank rules and regulations are aimed squarely at banks, not the non-bank financial companies that reside on “Wall Street.”

Regardless of the facts, critics such as Warren and Brown will never support efforts to roll back even parts of Dodd-Frank because they are philosophically on the side of bigger government. They barely tolerate free enterprise outside of financial markets, and nobody can confuse them with fans of limited government. This set of critics is dangerous because history clearly shows that a financial system with more government involvement is more fragile than one with less involvement.

Another group of Financial CHOICE Act critics—equally as dangerous—has murkier motives. This faction consists primarily of those who think more government involvement in markets is bad unless it benefits them. These people say things such as “we’ve already spent so much on complying with Dodd-Frank, we can’t possibly get rid of it now.” They are fine with excessive regulation because they recognize that more burdensome regulations act as a barrier to their smaller competition.

For instance, existing rules impose a much higher burden on start-up Fin-Tech firms than they do on someone like the Chicago Mercantile Exchange (CME), but it’s these Fin-Tech companies that pose the biggest competitive threat to the CME and other well-established companies.

And competition is what drives free enterprise so that consumers benefit. When regulations take away the competition, they also take away the benefits.

The Dodd-Frank Act also gives firms viewed (by regulators) as systemically important direct access to government support. In pretty much all cases, these are the well-established companies that don’t really want more competition. The fact that these firms tend to support Dodd-Frank regulations should give pause to anyone who thinks Dodd-Frank ended too-big-to-fail.

For instance, Clearing House Association President Greg Baer recently voiced his organization’s support for Dodd-Frank’s orderly liquidation authority (OLA), the provision regulators are supposed to use to keep the largest financial firms out of bankruptcy. Baer even stated that his members view OLA as a “credible backstop.”

The details of OLA are mind-numbing, but you don’t have to be a rocket scientist to understand why large financial firms’ executives might want a “credible backstop.”

The same people hoping to maintain the status quo (i.e., the world after Dodd-Frank) are among the group who, in 2008, argued for government support to prevent the world economy from crashing. This sort of talk was not based on noble concern for mankind. It was motivated by self-interest – losing as little money as possible.

It’s no coincidence that someone like ex-Treasury Secretary Hank Paulson, former CEO of Goldman Sachs, would push for a plan that helps save companies heavily invested in frozen credit markets.

The competitive process is what drives innovation and lower prices. This truism holds in financial markets just as it does in non-financial markets.

More rules and regulations lead to less innovation and higher prices. People who understand this relationship should push for more reforms such as those found in the Financial CHOICE Act.